Reforming Insolvency Systems in Latin America
The note shares conflicting interests hampering insolvency systems reform in Latin America, and aims at assessing legal weaknesses, to propose some common solutions. Most insolvency systems share two prime objectives: allocating risk among particip...
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| Format: | Viewpoint |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/1999/06/717474/reforming-insolvency-systems-latin-america http://hdl.handle.net/10986/11474 |
| Summary: | The note shares conflicting interests
hampering insolvency systems reform in Latin America, and
aims at assessing legal weaknesses, to propose some common
solutions. Most insolvency systems share two prime
objectives: allocating risk among participants in the
economy, in a predictable, equitable and transparent way,
and, maximizing the value of the insolvent firm for the
benefit of all interested parties, and the broader economy.
However, current regional problems reflect too rigid and
formal insolvency laws; very high degrees of judicial
discretion, increasing uncertainty, and financial risks;
rampant corruption; absence of enforcement mechanisms to
protect creditor interests; and, a powerful, explicit bias
in favor of labor claimants, who are highly protected under
preferential treatment. The note proposes a common set of
essential reforms, to be prioritized according to each
county's circumstances. First, disclosure of
behind-the-scene dealings should be required, incentives
created to combat corruption, rules of conduct setup, and,
insolvency professional associations fostered. Second,
insolvency laws should clearly differentiate criminal, from
bankruptcy issues, where criminal conduct should not
preclude insolvency relief to a business in crisis. Third,
bankruptcy proceedings demand rapid resolution, by
specialized courts, under regional cooperation in
cross-border insolvency cases. |
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